Strategies for International Product Introduction: Starbucks DoubleShot© Meets Mexico A thesis submitted to the Miami University Honors Program in partial fulfillment of the requirements for University Honors with Distinction by Eric Cipra May 2006 Oxford, Ohio ii ABSTRACT STRATEGIES FOR INTERNATIONAL PROUCT INTRODUCTION: STARBUCKS DOUBLESHOT© MEETS MEXICO by Eric Cipra Starbucks Coffee Company is a specialty coffee retailer with approximately 8,500 locations in over 30 countries worldwide. With a focus on cultivating strong customer relationships through continuous innovation, quality, and people management, Starbucks has become one of the most recognizable brands in the world. In 2002, the company took two steps toward expansion—it expanded its ready-to- drink product line by introducing Starbucks DoubleShot© to the US market and made the decision to enter the country of Mexico for the first time. DoubleShot©, a unique blend of Starbucks’ signature espresso and cream in a 6.5-ounce can, has proven itself to be a slow- growing domestic success and category leader, and the nearly 72 Mexican Starbucks locations (operated through a joint-venture with Alsea S.A.) have experienced extensive growth and expansion. Given these factors, coupled with recent experience Starbucks has had in introducing a ready-to-drink beverage into Japan, the timing is ripe for the introduction of DoubleShot© into Mexico. This work will discuss many of the necessary strategies behind a successful international introduction, touching on Starbucks’ history, its global experience, DoubleShot© itself, and an analysis of the Mexican marketplace. Finally, it will conclude by proposing an appropriate strategy for this introduction, taking into account the characteristics most appropriately kept the same and those most appropriately adapted to the market. iii iv Strategies for International Product Introduction: Starbucks DoubleShot© Meets Mexico By Eric Cipra Approved by: _________________________, Advisor Dr. Gillian Oakenfull _________________________, Reader Mrs. Janice E. Taylor _________________________, Reader Dr. Antonio Sánchez-Jiménez Accepted by: _________________________, Director, University Honors Program v vi Acknowledgments I would like to thank Dr. Gillian Oakenfull, my advisor, for her patience and guidance during this process. Her numerous insights, flexibility and wit made for a “wonderfully warm” and surprisingly stress-free experience. Many thanks are deserved. I would also like to thank my readers, Mrs. Janice E. Taylor and Dr. Antonio Sánchez- Jiménez, for their ability to provide great feedback while dealing with communication that could be considered patchy at best. Their flexibility and assistance provided fresh insight and the final polish that this work needed during its final two weeks. I want to express gratitude to Dr. Carolyn Haynes for providing the initial impetus behind this endeavor, from answering silly questions to helping me focus my admittedly broad topic to what it is today. Finally, I want to thank collectively those around me who were forced to listen to me speak repeatedly about ‘my thesis,’ Starbucks and Mexico all this while. Their patience and understanding proved invaluable, and their humor helped keep me sane. vii Table of Contents Introduction .................................................................................................................... 1 Starbucks Corporation ................................................................................................... 1 Overview .................................................................................................................. 1 Global Strategies ...................................................................................................... 6 History of Global Expansion ............................................................................. 6 Japanese Operations | Year Entered: 1996 ......................................................... 6 United Kingdom Operations | Year Entered: 1998 ............................................ 8 Latin American Operations | Year Entered: 2002 .............................................. 10 Starbucks DoubleShot .............................................................................................. 12 Strategy for Mexico ....................................................................................................... 14 Initial SWOT Analysis ............................................................................................. 14 Strengths ............................................................................................................ 15 Weaknesses ........................................................................................................ 16 Opportunities ...................................................................................................... 16 Threats ................................................................................................................ 17 RTD Market Analysis .............................................................................................. 18 Standardized Elements ............................................................................................. 20 Segmentation Approach / Target Audience ....................................................... 21 Positioning ......................................................................................................... 22 Brand Name ....................................................................................................... 24 Product Decisions .............................................................................................. 24 Marketing Communications (Promotional Mix) ............................................... 25 Localized Elements .................................................................................................. 25 Packaging Decisions .......................................................................................... 26 Distribution ........................................................................................................ 26 Marketing Communications (Message) ............................................................. 28 Pricing (Competitive and Costs) ........................................................................ 30 Conclusion ..................................................................................................................... 31 References ...................................................................................................................... 32 viii List of Tables Table 1: Values and objectives of Alsea S.A. ................................................................ 11 Table 2: Summarized SWOT analysis ........................................................................... 17 Table 3: Advantages of both standardization and localization ...................................... 19 ix 1 Introduction The Starbucks Coffee Company is renowned for its ability to cultivate strong customer relationships through the use of continuous innovation, a strong focus on quality, and great people management. From its very inception, it has provided customers with a unique product in a warm and inviting ambience that encourages customers to return frequently. Some of its successes include its specialized dark-roasted coffees and blends, its unique Frappuccinos©, and its espresso beverages such as DoubleShot©. These coffee products began in the retail stores, but in order to establish themselves in a new niche, Starbucks extended the last two to the world of domestic bottled beverages and new retail locations. This work will focus specifically on the extension of Starbucks DoubleShot© into the international world—one which Starbucks has known intimately for the past 10 years—with Mexico as the country of focus. Taking into account the strategies utilized in its domestic introduction, a study regarding these decisions will be undertaken that will ultimately discuss the Starbucks Corporation itself, the DoubleShot© product, and the international Mexican market (specifically regarding ready-to-drink beverages). Starbucks Corporation Overview Starbucks Coffee Corporation is a specialty coffee retailer that produces and sells a variety of hot and cold beverages, complementary food items, coffee-related accessories and equipment, teas and other non-food products. As of May 2005, it has 2 opened over 8,500 retail locations in over 30 countries worldwide. The company itself is headquartered in Seattle, Washington (“Starbucks Corporation” May) and is headed by company-founder and CEO Howard Schultz. In twenty some odd years, Schultz has transformed what once was a locally- oriented Seattle coffee manufacturer focused on providing its customers with the best in dark-roasted whole beans and ground coffee into a “profitable national retailer with a simple, if radical, growth strategy: investing in employees” (“Starbucks—Investing” 137). In his own words, Schultz succinctly describes the focus of this strategy: “Our only sustainable competitive advantage is the quality of our workforce. We’re building a national retail company by creating pride in—and providing a stake in—the outcome of our labor” (“Starbucks—Investing” 137). This, coupled with a strong mission statement (which can be found below), has served the company very well over its lifetime as it has grown by leaps and bounds yet stayed true to its values. As Schultz says, “We built